CA Life Agent Exam Prep
1035 Exchange - ANS-IRS allows tax-free transfer of cash values between 2 LIKE policies (i.e.
Life to Life, Annuity to Annuity, or Life to Annuity).
24 Hour Coverage (CA) - ANS-Provides 24 hr. health coverage both "on" & "off" job, but may
cause coverage duplication & coordination challenges.
7 Pay Test - ANS-If total premiums paid w/in 1st 7 yrs. exceed net level premium that should
have been paid, policy is an MEC.
Accelerated Benefits (aka Terminal Illness or Living Benefits) rider - ANS-Allows policy owner to
w/draw set % of death benefit upon verification of terminal illness w/ expectancy 12-24 mths.;
generally tax-free.
Accidental Death (aka Multiple Indemnity) rider - ANS-Provides increased death benefit if death
occurs w/in 90 days & as result of accident; relatively INexpensive add-on.
Accidental Death & Dismemberment (AD&D) Disability rider - ANS-Provides accidental death
benefit @ full $ of "principal sum". Dismemberment is paid only @ 50% principal sum ("capital
sum").
Accidental Death & Dismemberment (AD&D) Life policy - ANS-Provides accidental death benefit
@ full $ of "principal sum". Dismemberment is paid only @ 50% principal sum ("capital sum").
Adjustable Whole Life policy - ANS-Same as WL but policy owner can adjust death benefit w/
corresponding premium adjustments; mostly obsolete.
Adverse selection - ANS-Tendency of poorer risks to seek insurance.
Age Discrimination in Employment Act (ADEA) - ANS-Federal law which prohibits companies w/
20+ employees from denying work & medical benefits to employees due to age.
AIDS/HIV discrimination - ANS-Prohibited w/ regard to testing for people of same class; test
results must remain confidential; coverage may be declined (once discovered).
Annuity - ANS-Written contract that provides INCOME @ high interest rate for fixed period OR
for annuitant's lifetime w/ possible death benefit.
Annuity Classifications (1 of 5): How premium is paid - ANS-1: Single (lump sum) premium; 2:
Periodic premiums - can be level (fixed $) OR flexible from mth. to mth. (w/ req. min.)
,Annuity Classifications (2 of 5): When benefits begin - ANS-1: Immediate benefits rec'd w/in 30
days but premium must be paid by lump sum; 2: Deferred - usually until retirement.
Annuity Classifications (3 of 5): Source of income - ANS-1: Fixed - guaranteed fixed monthly
income & fixed interest rate; 2: Variable - unguaranteed; monthly income varies based on
stocks/bond returns.
Annuity Classifications (4 of 5): Disposition "pay-out" of proceeds - ANS-1: Straight aka Pure
Life - lifetime income but no survivorship refund; 2: Life w/ Period Certain - lifetime income w/
death benefit of monthly annuity for remaining predetermined term.
Annuity Classifications (4 of 5): Disposition "pay-out" of proceeds (continued) - ANS-3: Annuity
Certain - monthly income paid for predetermined term ONLY (not lifetime) w/ death benefit of
monthly annuity for remaining term.
Annuity Classifications (5 of 5): # of lives - ANS-1: Individual; 2: Joint - multiple annuitants paid
until 1st dies; 3: Joint & Survivor - multiple annuitants paid until 1st dies THEN survivors paid but
@ reduced $.
Annuity surrender charges - ANS-No-charge annuity w/drawals allowed up to 10% of total,
THEN penalized on sliding scale based on # policy yrs.; conditionally waived.
Applicant Representations vs. Warranties - ANS-Representation - oral or written statement
made to best of knowledge or belief; Warranty - statement guaranteed/presumed/understood to
be true.
Approval Type Conditional receipt - ANS-Receipt whereby coverage incepts ONLY after
underwriting approval.
Automatic Premium Loan (APL) provision - ANS-No-cost provision that authorizes Insurer to
borrow from cash value to pay unpaid premiums after grace period; must ask for @ app. time.
Basic Medical plan - ANS-No deductible coverage for: daily room/board; ancillary costs; surgeon
&/or physician expense (for added premium).
Beneficiary provisions - ANS-Primary - if 2 or more, equally shared; Contingent (Secondary) -
only if primary dead; Tertiary - only if both primary & secondary dead. If none listed, goes to
estate.
Binding receipt (aka Temporary Insurance Agreement) - ANS-Receipt whereby coverage incepts
immediately upon submission of full consideration, unless declined & premium refunded.
Blackout Period - ANS-Period of time following any children's survivor benefit & before benefits
are provided to employee's widow/widower.
, Blue Cross/Blue Shield - ANS-Prepaid med. benefits for "subscribers" @ approved facilities;
many non-profit; Blue Cross - Hospital stays; Blue Shield - M.D. costs.
Business Continuation (aka Buy-Sell) Disability policy - ANS-Provides for continued operation of
business if partner becomes disabled, by allowing other partner(s) to buy disabled partner's
interest in business.
Business Continuation (aka Buy-Sell) policy - ANS-Provides for continued operation of business
if partner dies, by allowing surviving partner(s) to buy deceased partner's interest in business.
Business Overhead Expense (BOE) Disability policy - ANS-Provides usual & customary
business expenses (rent, utilities, salaries, mortgage) if owner becomes disabled; premiums
deductible, benefits taxable.
CA Work. Comp. Statutes - ANS-1: Req., unless self-employed; 2: 7-day wait for disability
benefits; 3: Premium based on ex-mod; 4: Rates approved by CDI; 5: to sell, must satisfy
education reqs.
Cash value - ANS-After 2-3 yrs., Whole Life policy equity builds tax-deferred @ fixed interest
rate until it equals death benefit; borrowable but taxable.
CHAMPUS (aka TriCare) - ANS-Gov't. organization providing health care benefits for
dependents of military personnel.
Change of Occupation provision - ANS-If Insured changes to: more hazardous job - benefits
reduced; less hazardous job - premiums reduce.
Civil Rights/Pregnancy Discrimination Act - ANS-Federal law which prohibits companies w/ 15+
employees from decreasing coverage benefits for women affected by pregnancy or childbirth.
Claim Form (aka Proof of Loss Form) provision - ANS-Upon notice, Insurer must provide Claim
Form (Proof of Loss Form) to Insured w/in 15 days.
COBRA Time Limitations - ANS-Time extension of benefits based on "qualifying" event. 18 mth.
extension if laid off or fired; 36 mth. extension if death, divorce or child leaves home.
Common Accident provision - ANS-If 2 or more family members are injured in the same
accident, only payment of a single deductible is required.
Common Disability Exclusions - ANS-War/Military; Intentional self-inflicted; Aviation
(non-commercial); Foreign country; Loss of professional license; Illegal activity; Mental disorders
(after 1-2 yrs.).
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